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Case ECS-11/14: Serbia / State aid

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summary of the case

registered:

upon complaint 18.06.2014

The subject matter of this case are four state guarantees granted by the Republic of Serbia for loans from international financial institutions to EPS for the Kolubara B power plant project and the transfer of property and land from the Republic of Serbia to EPS for the same project. The Secretariat preliminarily concluded that these measures constitute State aid and that the Republic of Serbia infringed the Treaty in two ways. On the one hand, the Commission for State Aid Control failed to assess whether four of the measures provided by the Republic of Serbia were compatible with the Energy Community internal market. On the other hand, the single compatibility assessment undertaken by the Commission for State Aid Control was not in line with the State aid acquis. In both cases, the Republic of Serbia failed to fulfil its obligation to effectively enforce the Energy Community State aid acquis.

Article 18(1)(c) of the Treaty contains a prohibition of State aid which according to Article 19 of the Treaty also applies to public undertakings and undertakings, to which special or exclusive rights have been granted. These provisions, together with Article 6 of the Treaty, require the Contracting Parties to introduce a corresponding prohibition of State aid into their national legal systems and ensure its enforcement.

Case ECS 11/14 information requests

procedural history

On 14 July 2016, the Secretariat sent an Opening Letter to the Republic of Serbia for its failure to comply with the Energy Community State aid acquis. The Republic of Serbia failed to comply with its obligations under the Treaty, in particular Articles 18 and 19 thereof, because the Commission for State Aid Control did either not assess or incorrectly assessed the compatibility of State aid granted to Elektroprivreda Srbije (EPS) for the Kolubara B power plant project.

Procedure

By sending an Opening Letter, the Secretariat initiates a preliminary procedure, the purpose of which is to give the Republic of Serbia the opportunity to react to the allegation of non-compliance with Energy Community law within three months and to enable the Secretariat to establish the full background of the case.

According to Articles 7 and 17 of the Rules of Procedure for Dispute Settlement, interested parties may be granted access to the case file and may submit written observations on the present case to the Secretariat during the preliminary procedure.

On 28 February 2017, the Secretariat sent a Reasoned Opinion to the Republic of Serbia for non-compliance with the State aid acquis to follow up on its Opening Letter of 14 July 2016.

Having taken into account the Government’s reply to the Opening Letter, the Secretariat maintains its findings therein. In the Reasoned Opinion, it reiterates its view that by the Commission for State Aid Control either not having assessed or incorrectly assessed the compatibility of State aid granted to Elektroprivreda Srbije for the Kolubara B power plant project, the Republic of Serbia failed to comply with its obligations under the Treaty, in particular Article 18 and 19 thereof.

Reasoning

In its reply to the Opening Letter, the Republic of Serbia based its argumentation mainly on its Stabilization and Association Agreement with the EU and its Interim Agreement on Trade and trade-related matters, which provide for an obligation to apply the State aid prohibition to public undertakings only as of 2012. Furthermore, it argues that the Constitution of the Republic of Serbia prohibits retroactive effects of law and other general acts and the application of the rules on State aid control to a period in which its application was not mandatory would infringe this provision. Finally, it states that the transfer of property is governed by the Public Property Law, which is not selective.

The Secretariat, however, concludes that there is no conflict between Article 39 of the Interim Agreement and the obligations of the Treaty regarding enforcement of the State aid acquis because Article 39 does not hinder the Commission for State Aid Control to apply the State aid prohibition already before 2012, but merely postpones the obligation to do so. As there has not been any exemption for public undertakings in place and therefore the State aid prohibition already applied as of 2010, there is no need to apply the legislation on State aid prohibition in a retroactive manner. Finally, it is not the Public Property Law that is selective, but the individual measure, i.e. the transfer of property itself.

Procedure

The Republic of Serbia is requested to rectify the issues of non-compliance with Energy Community law identified in the Reasoned Opinion within a time limit of two months. Depending on the reply of the Republic of Serbia, the Secretariat may submit the case to the Ministerial Council for a decision on the non-compliance of the Republic of Serbia with Energy Community law.

After carrying out a preliminary procedure, the Secretariat submitted a Reasoned Request on Serbia’s failure to comply with the Energy Community State aid acquis. In its Reasoned Request, the Secretariat reiterates its view that by the Commission for State Aid Control either not having assessed or incorrectly assessed the compatibility of State aid granted to Elektroprivreda Srbije for the Kolubara B power plant project, the Republic of Serbia failed to comply with its obligations under the Treaty, in particular Article 18 and 19 thereof.

In the framework of assistance by the Secretariat under Article 2 of the Dispute Settlement Procedures, on 11 June 2018, the State Aid Commission adopted a compliant decision regarding the measures brought up by the complaint and thereby removed the Secretariat’s concerns with regard to State aid compliance. The Secretariat therefore decided to close the case.